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James Hyerczyk
Economic Uncertainty

U.S. investors had their hands full on Thursday with early session weakness being fueled by the news that Huawei CFO Meng Wanzhous was arrested by Canadian authorities in Vancouver and a late session recovery being triggered by a report which suggested Federal Reserve officials are mulling a new “wait-and-see” stance after their December FOMC meeting, which could signal a slower pace of interest rate hikes in 2019.

However, in between the major events were a slew of U.S. economic reports. And this stream of data is scheduled to continue on Friday.

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Challenger Job Cuts:  Is It Signaling an Upcoming Downturn?

The first report of the day was Challenger Job Cuts. It came in at 51.5% versus the previous read of 153.6%. According to the report, the number of planned layoffs announced by U.S.-based employers totaled 53,073 in November.

According to global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc., “Last month’s job cut total is 29.8 percent lower than the 75,644 cuts announced in October and 51.5 percent higher than the 35, 038 cuts announced in the same month last year. So far this year, employers have announced 494,775 cuts, 28 percent higher than the 386,347 announced through this point last year. This is the highest 11-month total since 2015, when 574,888 cuts were tracked through November.”

“Monthly job cut announcements averaged under 35,000 in all of 2017 and just under 44,000 in 2016. In 2018, cuts are averaging nearly 45,000 per month, with the last four months averaging over 55,000. This upward trend is indicative of a potential economic shift and could spell a drawdown,” said Challenger.

“The job market remains strong for the moment, however. The tight labor market and high demand for skilled workers mean most of those who find themselves unemployed have a good chance of finding new positions,” he added.

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ADP Non-Farm Employment Change:  Missed Forecast, Previous Month Revised Lower

According to the ADP National Employment Report, U.S. private employers added 179,000 jobs in November, falling slightly below economists’ expectations. Economists surveyed by Reuters had forecast a gain of 195,000 jobs. Also, October private payrolls were revised down to an increase of 225,000 from the previously reported 227,000.

Revised Nonfarm Productivity and Revised Unit Labor Costs:  Rose More than Expected, but Broader Trend Remains Lackluster

The productivity of non-farm workers, measured as the output of goods and services for each hour on the job, increased at a 2.3% seasonally adjusted annual rate in the third quarter, the Labor Department said Thursday.

A gauge of compensation costs, unit labor costs, increased at a 0.9% annual rate in the July-to-September period. That was a downward revision from the initial estimate of a 1.2% increase. Unit labor costs fell at a revised 2.8% pace in the second quarter. Economists surveyed by the Wall Street Journal had forecast the revised third-quarter figures to show a 2.2% increase productivity from the prior quarter, and labor costs to increase at a 1.1% rate.

Weekly Jobless Claims: Four-Week Average at April High

Weekly Unemployment Claims were 231K, higher than the 226K forecast, but lower than the previously reported 235K. Moreover, the four-week moving average of claims rose to its highest level since April, suggesting a loss of momentum in the labor market.

Decline in Factory Orders Offset by Rise in Services PMI

Another sign of a weakening economy was a bigger-than-expected decline in Factory Orders. The previous month was also revised lower.

The most bullish news was the ISM Non-Manufacturing PMI report. It came in at 60.7, higher than the 59.1 estimate and better than the 60.3 previous read.

Something Brewing in Labor Markets

The weaker than expected jobs data as represented by the Challenger Job Cuts report and the Weekly Unemployment Claims report, suggests a loss of momentum in the labor market. This places greater importance on Friday’s U.S. Non-Farm Payrolls report. It is expected to show the economy added 198K jobs in November. Meanwhile, the Unemployment Rate is expected to remain at 3.7%. Average Hourly Earnings are forecast to have risen 0.3%. This number is very important because it will help determine if inflation is rising or falling.

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